Several affiliated companies formed a consortium. The consortium jointly acquired a self-sufficient function facility site within a public housing district and constructed a group control tower (integrated headquarters) with construction costs amounting to several tens of billions of Korean won. The building received approval for use as a general building.
 

Externally, the consortium members held ownership of the entire building in proportion to their respective ownership interests. Internally, however, a structure was required under which each company could independently use, enjoy, and dispose of designated floors or areas. In addition, some of the participating companies were legally restricted from engaging in real estate leasing businesses, and this limitation had to be taken into account when designing the ownership and use structure.

(1) Structuring a Sectional Ownership-Type Co-Ownership Arrangement and Providing Legal Advice
 

• Based on experience in similar matters, One Law Partners, LLC proposed a sectional ownership-type co-ownership structure. Under this arrangement, the consortium members maintained co-ownership interests externally while each member held exclusive ownership rights over designated floors internally.

• A sectional ownership-type co-ownership agreement, including floor-by-floor allocation of use, was prepared.

• Legal advice was provided in response to various inquiries from the participating companies, including:

(2) Acquisition Tax Reporting, Amended Filings, and Reassessment Requests at Each Project Stage
 

• Acquisition tax reporting was handled throughout each stage of the project.

• This included:

• Following multiple consultations with the relevant local government, increased construction costs were reflected and the floor allocation provisions contained in the consortium agreement were updated. Amended tax filings and reassessment requests for each participating company were then filed and managed.

• During this process, legal arguments were also developed regarding the calculation of the “rental ratio” under applicable tax laws, particularly where business scope restrictions could create issues, such as risks associated with dissolution if portions of the property were leased to third parties.
 

(3) Tax Tribunal Proceedings Concerning the Denial of Reassessment Requests
 

• For purposes of adjusting ownership ratios, certain land interests were transferred at appraised value. Subsequently, the public housing supply agency notified the parties that:

“A transfer of ownership interests at a price exceeding the original supply price may violate the transfer restriction provisions under the Special Act on Public Housing.”

• In response, the parties executed amended agreements reducing the transaction price to the original supply price level, and reassessment requests were filed seeking refunds of a portion of the acquisition tax already paid.

• The local government denied the reassessment requests on the grounds that a subsequent amendment of the contract could not affect an already established tax obligation once a de facto acquisition had occurred.

• Accordingly, an appeal was filed with the Tax Tribunal.

• The Tax Tribunal ruled as follows and cancelled the denial dispositions:

This matter demonstrates a comprehensive engagement involving the construction and ownership of a headquarters building worth several tens of billions of Korean won by multiple affiliated companies, encompassing:
 

• Structuring internal ownership arrangements through a sectional ownership-type co-ownership framework;

• Managing acquisition tax reporting from land acquisition through approval for use of the building;

• Handling amended filings and reassessment requests through consultations with the local government; and

• Successfully pursuing Tax Tribunal proceedings.


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Sun-Seong Seo, Attorney | ssseo@onelawpartners.com
Joun-Woo Park, Attorney | jwpark@onelawpartners.com
Da-Aeh Kim, Attorney | dakim2@onelawpartners.com
Property One | Property One (Local Tax & Levy Practice Group) is the first law firm practice group in Korea dedicated to local tax and levy matters, providing comprehensive services throughout all stages of tax matters, including responses to tax audits, pre-assessment reviews, administrative appeals, and litigation.
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Public Relations Team, One Law Partners, LLC | pr@onelawpartners.com